A U.S. appeals court has ruled that the U.S. Federal Communications Commission did not have the authority to order Comcast to stop throttling peer-to-peer traffic in the name of network management.

The U.S. Court of Appeals for the District of Columbia Circuit, in an order Tuesday, overturned the FCC's August 2008 ruling forcing Comcast to abandon its network management efforts aimed at users of the BitTorrent p-to-p service and other applications. The FCC lacked "any statutorily mandated responsibility" to enforce network neutrality rules, wrote Judge David Tatel.

Some net neutrality advocates said the ruling raises broad questions about the FCC's authority to take any actions not spelled out in law.

FCC spokeswoman Jen Howard downplayed the broader implications of the ruling. The agency will move forward with new efforts to create net neutrality rules, and it will have a "solid legal foundation," she said.

"Today's court decision invalidated the prior commission's approach to preserving an open Internet," Howard said. "But the court in no way disagreed with the importance of preserving a free and open Internet; nor did it close the door to other methods for achieving this important end."

The FCC's 3-2 vote to enforce a set of net neutrality principles came after news reports in late 2007 that Comcast was slowing BitTorrent traffic for many customers. Comcast first denied it was throttling traffic, then said it was doing so only to protect customers from network congestion.

The appeals court ruling may call into question the FCC's authority to move forward with formal net neutrality rules. The FCC in October launched a rulemaking process to formalize the net neutrality principles in place since 2005, and Thursday is the deadline for reply comments in that rulemaking proceeding.

The FCC did not make convincing arguments that it has so-called "ancillary authority" to regulate cable broadband service, which the agency classified as a lightly regulated information service in 2002, Tatel wrote.

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Unless the FCC takes action to reclassify broadband service, the court's decision calls into question FCC authority in many areas, including protecting broadband consumer privacy and redirecting money from the Universal Service Fund (USF) into broadband deployment, said Gigi Sohn, president of Public Knowledge, a digital rights group that complained to the FCC about Comcast's traffic throttling.

"Today's appeals court decision means there are no protections in the law for consumers' broadband services," Sohn said in a statement. "Companies selling Internet access are free to play favorites with content on their networks, to throttle certain applications or simply to block others."

"As a result of this decision, the FCC has virtually no power to stop Comcast from blocking Web sites," added Derek Turner, research director for Free Press, a second digital rights group that complained about Comcast's traffic management. "The FCC has virtually no power to make policies to bring broadband to rural America, to promote competition, to protect consumer privacy or truth in billing. This cannot be an acceptable outcome for the American public and requires immediate FCC action to re-establish legal authority."

FCC lawyers argued that its net neutrality decision was "reasonably ancillary" to the agency's enforcement of several of its responsibilities under the Communications Act, the 1934 law giving the FCC its primary authority. But the FCC did not prove the net neutrality action was necessary, Tatel wrote.

"The Commission has failed to make that showing," he wrote. "It relies principally on several Congressional statements of policy, but under Supreme Court and D.C. Circuit case law statements of policy, by themselves, do not create 'statutorily mandated responsibilities.'"

While the FCC has some ancillary authority outside that spelled out in the Communications Act, it must defend that authority in a "case-by-case basis," Tatel wrote.

The Associated Press, in late 2007, reported that Comcast was slowing BitTorrent and some other traffic without telling its customers. Consumer rights groups Public Knowledge and Free Press, along with online video distributor Vuze, filed complaints with the FCC.

Comcast said it throttled P-to-P traffic only during times of peak congestion, but studies from the FCC and the Max Planck Institute for Software Systems in Germany contended that Comcast slowed BitTorrent traffic around the clock.

Sohn and Turner called on the FCC to begin a proceeding that would reclassify broadband carriers as so-called common carriers, which are regulated more heavily than the current classification of information provider. The FCC, during former President George Bush's administration, moved away from that common carrier classification.

"If it chooses, the commission can continue to roll the dice and let the courts decide each time it wants to try to put some consumer protections on a broadband service," Sohn said. "The court decision left open that option. We have a different idea. The FCC should immediately start a proceeding bringing Internet access service back under some common-carrier regulation similar to that used for decades."

However, it's the wrong time to regulate broadband at the same time the FCC is trying to implement the national broadband plan, said Thomas Lenard, president of the Technology Policy Institute, a free-market think tank. Lenard praised the court's decision, saying net neutrality rules would ultimately hurt consumers.

The national broadband plan focuses on rolling out broadband to all corners of the U.S. and increasing broadband speeds.

"I am concerned ... that the Commission may now attempt to reclassify broadband as a telecommunications service, subjecting it to traditional public utility-type regulation," Lenard said in a statement. "In my opinion, this would be a grave mistake that would undermine the goals of the recently released national broadband plan.

Comcast, in a statement, said it was "gratified" by the court's decision. "Our primary goal was always to clear our name and reputation," the statement said. "We have always been focused on serving our customers and delivering the quality open-Internet experience consumers want. Comcast remains committed to the FCC's existing open Internet principles, and we will continue to work constructively with this FCC as it determines how best to increase broadband adoption and preserve an open and vibrant Internet."

In Canada traffic management has been allowed since October 2009 by the federal telecom regulator, the Canadian Radio-television and Telecommunications Commission, but only under certain conditions. First, the policies must be neutral and cannot be "unjustly discriminatory nor unduly preferential," a standard set in federal law for all telecommunications. Second, traffic management policies have to be made clear to consumers and wholesale buyers of access. In addition, the regulator has to approve traffic management policies that are more restrictive on a service provider's wholesale purchasers than to its retail customers. Third, the slowing of time-sensitive data (such as live video or VoIP [voice over Internet Protocol] traffic) cannot be done without regulator approval. Generally, the commission said traffic management policies must be "designed to address a defined need, and nothing more."

So far no ISP (Internet service provider) has challenged the commission's ruling.

The Canadian rules apply only to wireline service. The commission is expected to decide this year whether it has the authority to regulate over mobile wireless data services, and, if it does, whether it will apply the same policy to wireless.